SHIP providers buck market trend

Equity release trade body Safe Home Income Plans (SHIP) has revealed that business volumes produced by its members in the second quarter of the year have increased by 14% over volumes in quarter one, reports Mortgage Solutions.

A total £275.7m of equity was released by SHIP members in the second quarter, 14% higher than the £242.7m released in the first quarter.

Andrea Rozario, director general of SHIP, said results underlined the robust health of the equity release sector despite the impact of the credit crunch that was having such a negative effect on the mainstream mortgage market. She explained: “It also serves to highlight the distinctly different forces that drive the equity release market relative to the mainstream market, including the fundamental pressures of the UK’s ageing population, falling levels of pensions contributions and the very high levels of personal wealth held in housing equity.”

SHIP said that in terms of distribution, the intermediary channel continued to dominate, although the percentage of total equity release business carried out relative to the direct channel fell slightly from 74% in the first quarter of 2008 to 71% in the second quarter.

Equity release and the credit crunch

How is the credit crunch affecting equity release?

Product wise, not at all. There are no signs of any providers being short of money or changing their products.

As for potential clients, the impact seems to be more significant.

It seems that some people are standing still, even it they’re not quite sure why. They see constant stories in the media about falling house prices, rising costs of petrol, electricity, gas and groceries. Uncertainty breeds inactivity.

Maybe they are thinking “Things are uncertain and I don’t feel confident, so I will hold off doing anything.”

Is this the right approach?

Probably not. With the cost of living always rising, the need for equity release is greater than ever.

If the concern is about falling house prices, then the situation may get worse before it gets better. In which case, delaying action for a year or two may reduce the amount clients can release.

People should only take action that they feel confident about, but it is important to remember the guarantees that equity release plans from SHIP members provide.

Furthermore, with plans available that guarantee a proportion of the property can be protected as an inheritance, there is a strong case to be put for not letting the current concerns cause a delay in action.

Equity Release Solicitors Alliance is launched

The Equity Release Solicitors' Alliance was officially formed last week with six founding members, reports Mortgage adviser (11/6/2008).

The alliance, consisting of Ashfords, Birchall Blackburn, Equilaw, Goldsmith Williams, Gywn James and Lees Lloyd Whitley, will meet regularly to discuss issues impacting on the equity release market place, particularly from a legal perspective.

Claire Barker, chairman of Ersa and partner with Equilaw, said the founding members would meet regularly to debate industry issues and work together to ensure financial advisers had access to lawyers who shared the same vision.

The alliance will be an incorporated body with its own logo and website and members will abide by the terms of a written constitution.

Ms Barker said the group hoped to form affiliations with trade bodies, such as Safe Home Income Plans, the Law Society and the Association of Mortgage Intermediaries.

She said: "I am delighted to form an alliance with five like-minded firms to show that there are solicitors out there who have taken the bull by the horns and are committed to equity release as a specialist area of legal practice."

David Wright, managing director of Surrey-based advisers Sixty Plus, said the alliance was a good development in the equity release industry and he would like to see something similar set up for advisers.

Sixty Plus calls for change to ERCs

We would like to see all lifetime mortgage lenders relax their policy on early redemption charges.

Currently ERCs are waived in the event of a client dying or entering long term care. They are also waived on partial repayments due to downsizing. However, they are applied if the client does not port a certain amount of the lifetime mortgage and instead repays in full.

When a client expresses a possible future intention to sell their property and repay the whole plan, several lenders are impossible to recommend because they have ERCs that range from 0-25% subject to interest rate or gilt movements. Their products may be otherwise perfect for the client but we have to exclude them from.

In reality many of these clients may never sell but they want the option without the threat of a potentially huge penalty.

A change would be in everyone's best interests. It would give the lender more business and give clients more choice.

David Wright

SHIP floats exam table

Safe Home Income Plans (SHIP) has produced a qualification requirements table for intermediaries, reports Mortgage Solutions (17/3/2008).

The table, which is available on SHIP's website, lists the examinations needed to submit lifetime mortgages and home reversion plan business to SHIP's product provider members from 6 April.

Andrea Rozario, director general of SHIP, said the table had been produced to clear up any potential misunderstandings ahead of its deadline for advisers to pass their top-up exams. She said: "Confusion about the compulsory examinations needed by advisers for each aspect of equity release might have arisen as a result of Lifetime Mortgages and Home Reversions being regulated at different times."

Simon Smith, IFA at Independent Retirement Strategies, said a clarification of examinations would clear up any questions from brokers. He said: "Brokers need to know what they can and cannot advise on."

David Wright, managing director of provider Sixty Plus, said the table looked like a concerted effort by providers and bodies in equity release to provide more information to the market. He added: "Moves like this should increase trust and take up of equity release."

Abbey research hints at equity release launch

Abbey has reportedly been cancassing intermediaries regarding a potential launch into the equity release market, reports Mortgage Solutions (15/03/08).

This would not be the first time Abbey has dabbled in the equity release market, having previously joing SHIP.

Abbey also has a toe in the market through Stonehaven, although this is only a funding arrangement.

Godiva rides into equity release market

Godiva Mortgages, the intermediary arm of the Coventry Building Society, has entered the equity release market with a range of lifetime mortgages.

The range includes lump sum and drawdown products and Godiva is the first lender to offer an option with no early repayment charges.

Colin Franklin, managing director of Godiva Mortgages said: "I am delighted to be entering this growing market. Changing attitudes to retirement planning and increasing confidence in the sector, shows there is a genuine need for this type of product.

"For the first time, advisers will have access to drawdown and lump sum products without ERCs – a major step forward in the market place."

Sixty Plus comment: This is the most interesting development for some time. As the first lender to offer a product with no early repayment charges Godiva is a welcome addition. Some clients take equity release with the clear intention or repaying it in the short to medium term by moving house and downsizing. The absence of an early repayment charge that would normally be at least 5% will make equity release more appealing to some.